Zambian copper production to grow by 7% this year, despite power challenges

JOHANNESBURG (miningweekly.com) – The Zambian government’s support for the mining industry and strong copper prices are expected to drive growth in the country’s copper production for this year, despite ongoing power shortages.

BMI Research on Monday pointed out that, according to data published by the Zambian central bank, Zambia’s copper production reached 362 000 t by June 30, down slightly from the 367 000 t produced in the first half of 2016.

“No details have been given by the Zambian authorities on this decline, but it is likely that Zambia’s ongoing power supply problems have been the key constraint on copper mining activities,” BMI said.

“We are positive on Zambian copper and maintain our forecast of 7% growth this year as Zambian President Edgar Lunguremains supportive of the sector, and rising copperprices incentivise domestic miners to ramp up production during the second half of the year.”

Ongoing power shortages resulting from the country’s dependence on hydropower and rising water tariffs are the key risks facing the Zambian mining sector moving forward.

In August, two of the country’s biggest copper producers, Glencore and First Quantum Minerals, were forced to reduce power at key operations, owing to tariff disputes with electricity provider Copperbelt Energy Corporation.

However, improving rainfall and rising dam levels in the country will ease some of power shortages experienced in recent quarters.

Another key driver of strong Zambian copper production this year will be the positive trajectory of prices in 2017 relative to last year.

Since touching lows of $4 500/t in June last year, copper prices have risen over 57% to $6 810/t in August owing to strong demand from China.

“While it is possible that prices may unwind from current levels towards the end of the year, we think the gradual uptrend over the last 12 months will bode well for mining activity in Zambia.